Distribution Revolution Conversations about the Digital Future of Film and Television

Edited by MICHAEL CURTIN, JENNIFER HOLT, AND KEVIN SANSON

With a Foreword by Kurt Sutter

Q3 University of California Press r

Contents

University of California Press, one of the most distinguished university presses in the United States, enriches lives around the world by advanc­ ing scholarship in the humanities, social sciences, and natural sciences. Its activities are supported by the UC Press Foundation and by philan­ thropic contributions from individuals and institutions. For more infor- mation, visit www.ucpress.edu.

University of California Press Oakland, California Foreword vii © 2014 by The Regents of the University of California Acknowledgments ix ewe CARSEY·WOlf CENTER Introduction: Making of a Revolution 1 Michael Curtin, Jennifer Holt, and Kevin Sanson

Library of Congress Cataloging-in-Publication Data STUDIOS Distribution revolution : conversations about the digital future of film Editors' Introduction 21 and television I edited by Michael Curtin, Jennifer Holt, and Kevin Sanson ; foreword by Kurt Sutter. Gary Newman, Chairman, 20th Century Fox Television pages cm Richard Berger, Senior Vice President, Global Digital ISBN 978-0-520-28324-4 (hardback) ISBN 978-0-520-28325-1 (paperback) Strategy and Operations, Sony Pictures Home Entertainment 37 1. Motion pictures-Marketing 2. Motion pictures- Distribution. 3. Television programs-Marketing. + Television Kelly Summers, Former Vice President, Global Business broadcasting. 5. Digital media-Influence. 6. Chief executive Development and New Media Strategy, The Walt officers-United States-Interviews. 7. Motion picture producers Disney Company 47 and directors-United States-Interviews. 8. Television producers and directors-United States-Interviews. I. Curtin, Michael, editor Thomas Gewecke, Chief Digital Officer and Executive of compilation. II. Holt, Jennifer, 1968-editor of compilation. Vice President, Strategy and Business Development, III. Sanson, Kevin, editor of compilation. Warner Bros. Entertainment PN1995.9.M29D58 2014 59 384'.84-dc23 Mitch Singer, Chief Digital Strategy Officer, Sony Pictures Entertainment 74 Manufactured in the United States of America

23 22 21 20 19 18 17 16 15 14 UPSTARTS 10 9 8 7 6 5 4 3 2 1 Editors' Introduction In keeping with a commitment to support environmentally responsible Gail Berman, Founding Partner, BermanBraun and sustainable printing practices, UC Press has printed this book on 91 Natures Natural, a fiber that contains 30% post-consumer waste and Jordan Levin, President, Alloy Digital, and Chief meets the minimum requirements of ANSIINiso z39.48-1992 (R 1997) Executive Officer, Generate 101 (Permanence of Paper). vi I Contents

Betsy Scolnik, Founder, Scolnik Enterprises 111 Foreword Christian Mann, General Manager, Evil Angel Productions 121

Ted Sarandos, Chief Content Officer, Netflix 132 Anders Sjoman, Vice President, Communication, Voddler

CREATIVES Editors' Introduction Scott Frank, Screenwriter-Director Paris Barclay, Director-Producer Felicia D. Henderson, Writer-Producer

Stanton "Larry" Stein, Partner, Liner Law 200 kurt sutter Patric Verrone, Writer-Producer and Former President, Writers Guild of America, West Digital delivery of film and television, like most hasty births, has

Dick Wolf, Executive Producer and Creator, Law & Order 221 been clumsy, painful, and at times bloody.

Appendix: Interview Schedule 235 kurt sutter Glossary 237 About the Editors 243 But once the schmutz is wiped off, the cord cut, and the baby's Index 245 mouth wrapped around a teat, one can appreciate and marvel at the new life.

kurt sutter

I know being a male and a failed gentile, I have no right using child­ birth as a metaphor or the word "schmutz" in a sentence.

kurt sutter

But curbing impulses-not necessarily my strong suit. Like the digital new age, I can be entertaining, unpredictable, and a bit scary.

kurt sutter

I believe DD is the future of film/TV. In the not-too-distant yet­ to-come, there won't be programming, just content & distribution. And porn.

vii r viii I Foreword

Acknowledgments And like all things that change an industry, with great power comes the need for thoughtful reflection, fiscal and ethical responsibility.

kurt sutter

But this is Hollywood, so with great power usually just comes a better table at Toscana. Responsibility and ethics are for the S&P folks.

kurt sutter First and foremost, we thank the Carsey-Wolf Center at the University of Perhaps that's a bit jaded. But the truth is, fear is always the first California, Santa Barbara for the institutional support that helped make response to change. No one knows how DD will look in 2, 5, rn the interviews in this book possible. A number of individuals deserve spe­ years. cial recognition, most notably Constance Penley, Ronald E. Rice, Richard Hutton, and Nicole Klanfer. Members of the Carsey-Wolf Center Advi­ kurt sutter sory Board facilitated introductions and access. We are grateful for the enthusiasm they all have demonstrated for the interview initiative and We speculate, create, react, adjust. That's the equation at play our other research endeavors at the Media Industries Project (MIP). now: forecasts+$$$= startups+ consumer whims+ regulation= Joshua Green provided keen leadership in this project's earliest stages. confusion. Ethan Tussey and John Vanderhoef aided us with indispensable research assistance. Likewise, we thank Rebecca Epstein and Erin Lennon for their kurt sutter copyediting skills and Lorena Thompkins for her transcription services. Isabelle Carasso deserves credit for the initial concept behind our cover "Distribution Revolution" helps make sense of the mayhem. All design. we can do is keep the discussion going. That's what these profes­ At the University of California Press, Mary C. Francis and Kim Hoge­ sionals do. land masterfully guided this book through the publishing process (and did so, we might add, at breakneck speed). We thank them for their kurt sutter stewardship. Last, but certainly not least, we are indebted to the industry personnel From the studio to the lab, this book takes a thorough look at who spoke to us at length about the digital future of film and television. the incestuous and inevitable relationship between tech and We hope they find this book a testament to the productive potential of such entertainment. critical conversations between media professionals and academic research­ ers. Such collaboration has been a hallmark of Marcy Carsey's and Dick kurt sutter Wolf's vision for MIP since its inception in 2009. We thank them sincerely for their enthusiastic and unstinting support. So, buy the book and read it, bitches.

IX Introduction Making of a Revolution Michael Curtin, Jennifer Holt, and Kevin Sanson

In the past five years, the scramble to manage the digital future of film and television has sparked both turmoil and transformation, forcing indus­ try leaders to reconsider established maxims about how screen media are created, circulated, and consumed. We see it almost every day in the head­ lines of trade papers and the mainstream press. For example, the 2007 Writers Guild strike hinged on payments and residuals for network and cable television content being streamed online. After a long and bitter con­ flict, the writers finally settled when the studios agreed to pay them more for digitally distributed work. Although the strike was costly for all con­ cerned, the writers seemed to understand that a new era was dawning. Not only were digital platforms recycling content from other media, they also were becoming original creative forces in the entertainment industry. Netflix is perhaps the most obvious example. In 2013, the leading sub­ scription video-on-demand (SVOD) service surprised its cable and net­ work counterparts with prominent Emmy nominations for original pro­ ductions such as Arrested Development and House of Cards. Netflix says more original content is on the way. Meanwhile, Amazon and Hulu are rolling out their own programming. For now, these new shows look much like their broadcast and cable peers, but the programmers at the major SVOD services say that they don't need to play the ratings game and that they're aiming to break the mold with new approaches. Inflated rhetoric perhaps, but they have already proven that they are willing to leave tradi­ tion behind by releasing an entire season's worth of original episodes all at once, which has film and television companies abuzz with speculation about further innovations on the horizon. Of course the major media conglomerates have their own plans for the digital future. That became clear when Kevin Tsujihara was tapped to take

1 r

2 I Introduction Introduction I 3 charge of Warner Bros.' legendary Burbank studios, marking the first time developers-whose business models rest on their abilities to deliver pro­ a studio head was chosen from the home entertainment division, a unit gramming to tablets and mobile devices-continue to feed the rapacious that is now laser-focused on digital innovations. Remarkably, Jeff Bewkes, appetite for screen media wherever and whenever consumers want it. As a Time Warner's CEO, passed over his film and TV studio chiefs for the result, audiences are more fragmented than ever, and some even express post, raising eyebrows throughout the Hollywood community and likely frustration with what seems like too many choices from too many plat­ signaling that he no longer considers digital delivery simply an ancillary forms and services. Still, digital alternatives are gaining steam and are aftermarket. widely seen as the most important drivers of economic growth. This poses When looking to understand the current tumult in the media landscape, a key challenge for the major Hollywood studios: How do they monetize it is therefore clear that distribution networks and technologies are where the digital space without jeopardizing long-standing (and quite lucrative) the seeds of transformation have been sown. Indeed, screen media distri­ relationships with exhibitors, advertisers, and cable operators? bution has undergone a veritable revolution in the twenty-first century, Despite all of the "disruptive" innovations, most of the money being overthrowing institutional relationships, cultural hierarchies, and conven­ made today in film and television is still being made the old-fashioned tional business models. These transformations are largely due to the fact way: in theaters, from ads on linear television, or from syndication deals. As that the distribution business has long been the linchpin of Hollywood's such, some eyeballs are simply more important than others. For example, creative strategies and financial success. Since the early days of the major broadcast and cable television viewers continue to command exponentially studios, distributors have relied on a sequential release pattern, or "win­ higher advertising rates than those who view content on computers and dowing," to fully exploit the value of the content they control. By making mobile screens. At the same time, profound changes are taking place as content available in different markets for discreet periods of time, distrib­ taste-based algorithms and other emergent audience metrics are beginning utors have been able to wring the most revenue out of each market without to challenge traditional measurement techniques and undermine the pre­ sales from one window (e.g., digital video disc [DVD] sales) "cannibalizing" mium prices charged for conventional TV advertising. Audience engage­ the profits from another (e.g., domestic theatrical exhibition). Yet wide­ ment, rather than size, is the current zeitgeist, but no one knows for sure spread technological innovations have made traditional strategies look how to quantify it. In this context, social media has emerged as an extremely obsolete and betray the urgent need to refine the complicated calculus of important marketing and promotional tool, particularly because of the way windowing in the digital era. As content proliferates across screens of all it builds online communities around particular content brands. This, in sizes, the expansion of digital delivery platforms and cloud-based storage turn, has attracted the attention of content providers, advertisers, and cre­ technologies has transformed when, where, and how consumers engage ators. Yet the digital brand experience for online audiences still has a long with entertainment. Armed with high bandwidth and a bevy of connected way to go, and producers feel pressed to tinker endlessly with new tech­ gadgets, audiences expect "anytime, anywhere" access, even if it requires niques for generating buzz via social media. Unfortunately, this means them to turn to unauthorized means, such as peer-to-peer (P2P) £le­ that the creative workforce-especially writers and directors-often bears sharing networks, to get it. Ultimately, the conversations in this book map the brunt of this additional labor. Producing content for websites, social a wide range of concerns about the digital ecosystem but nevertheless draw media pages, and other interactive ventures rarely replaces traditional similar conclusions: major film and television companies must radically re­ workplace routines; instead, it has become the "second shift" of the digital align their business models around fresh modes of delivery or risk losing era, putting extra demands on the time and energy of creative talent with­ their audiences to a host of new rivals in the digital space. out offering additional compensation. Currently, the most innovative and successful competitors include Am­ In light of these developments, there has been some experimentation azon, Apple, and Netflix, all of whom exist somewhere between the dream by mainstream media, but studios, cable companies, and broadcast networks factories of Hollywood and the high-tech entrepreneurialism of Silicon nevertheless hesitate to transform their existing business models in any Valley. These companies are formidable contenders for the time and atten­ substantial way. Cloud-based "TV Everywhere" services such as Comcast's tion of audiences, yet their increasing popularity has prompted content Xfinity or HBO Go are prime examples, as they seem to address common providers to view them as uneasy allies. Likewise, many third-party app desires for anytime, anywhere access to television content on laptops and 4 I Introduction Introduction I 5 other mobile devices. But they do so only on the industry's terms-that is, financed, produced, promoted, packaged, marketed, measured, delivered, anytime, anywhere access is no substitute for a cable subscription; rather, it interpreted, enjoyed, and recirculated. It is changing our ways of using requires one. Similarly, studio-based content providers are developing their media and our ways of socializing through media. The distribution revolu­ own digital platforms, such as Crackle or NBC.com, and also cooperating on tion is therefore the subject of intense deliberation within the industry, collaborative ventures such as the digital storage locker UltraViolet. Yet con­ among policy makers, and among the population at large. As these conver­ sumers seem to perceive these branded destinations as walled gardens, and sations unfold, it has become apparent that the seismic changes taking place therefore none of these initiatives has generated the same degree of enthu­ today are among the most momentous in the history of modern media. siasm as the new breed of "upstarts," such as Netflix or Voddler. Furthermore, the major studios and networks remain unsure about which pricing structures and payment systems are most appropriate in the REVOLUTION REDUX digital space. Movie studio experiments with premium video-on-demand (VOD) releases have provoked negative reactions from theater owners who Throughout the interviews in this book, the role of 11disruptive" technol­ worry that this practice eats into ticket sales. Similarly, the never-ending ogy is a recurring theme with both executives and creatives suggesting cry from consumer advocates for a la carte cable TV pricing options has that technological innovation has been the driving force of change in the done little to break up bundled channel packages. These examples suggest new millennium. Government policy and popular culture likewise portray a fundamental confusion over how best to value content and audiences in technology as a determining force, even though technology is, by defini­ the digital era. And yet the ultimate determination of those values affects tion, an instrument, a tool for achieving human goals. Moreover, the public everything from licensing fees and global trade to compensation for below­ at large embraces the commonsense notion that technology is an autono­ the-line labor and the nature of competition. mous, seemingly natural force, despite the fact that triumphant technolo­ Taken together, this revolution is defined by debates over the value of gies throughout history have either been fostered by powerful interests or content, the behavior of audiences, and the creation of frictionless, user­ are ultimately put to work on behalf of influential elites. Scholars, on the friendly access. Each of these issues is tied to questions of agency and other hand, tend to be skeptical about the singular influence of technology, power. Who will be the ultimate winners? That will partially depend on preferring instead to see it as part of a broader set of social and economic the sustainability of legacy business models and the adaptability of industry forces. When they hear 11 The technology did it!," they usually wonder what leaders. Further consideration must be given to independent distribution other factors shaped that moment of change. platforms and Internet service providers (ISPs), which manage the 11 pipes" Given the fact that technology looms large in the conversations that that deliver digital content and thus provide crucial infrastructure for this follow and that the title of this book implies the centrality of digital tech­ revolution. Sensing that change is in the air, some ISPs have integrated nology as the driving force of change, it is important to explain why we see with content companies, Comcast being the most notable example. Now a this moment through a substantially different lens. Although we do indeed sprawling conglomerate, it is the largest Internet service provider, the believe that today the forces of change have coalesced around a cluster of world's largest pay-TV provider, and the owner of NBCUniversal, among new technologies, we see these innovations as part of a longer history of other properties. Comcast owns both content and conduits in the new digi­ social, cultural, and economic transformation. That is, the digital distribu­ tal ecosystem, thereby achieving an unprecedented measure of control over tion revolution emerged in part as a consequence of corporate maneuvers most aspects of the media environment. Exactly how much further it will that stretch back almost two hundred years. Moreover, this commercial be able to extend this control remains a politicized question, as its conduct competition took place in the context of common perceptions about the role falls to the scrutiny of increasingly lax government regulators who set the of media in society and political struggles about free expression and the boundaries for acceptable conduct in a highly consolidated industry. public good. Technological innovation is furthermore intertwined with The digital distribution revolution is therefore a dynamic and multifac­ long-standing popular aspirations to expand and improve audience access eted process, affecting almost every aspect of the film and television in­ to media entertainment. Indeed, throughout the history of electronic com­ dustries. It is changing the ways in which content is imagined, formulated, munication there has existed a recurring tension between institutional r

6 I Introduction Introduction I 7

ambitions and popular aspirations. On the one hand, audiences and inven­ access and the twentieth-century business models that sought to manage tors dream of technological utopias, while on the other executives and reg­ media flows and audience consumption. Today, however, media companies ulators work to harness and exploit the latest innovations. are competing to develop new business strategies and technologies that at Consequently, our collective imagination of technological potential has once offer audiences greater access while nevertheless monetizing content always outrun technical and institutional capacities. The very idea of de­ as fully as possible. In this new environment, older conventions of network livering audiovisual imagery to the home dates back to the nineteenth broadcasting compete with innovative approaches to subscription video on century; so too does the fantasy of personal portable devices. When the demand, and both compete with the relentless specter of piracy-a rela­ telegraph was first introduced in the 1840s, many Americans imagined tively novel audience alternative, regardless of its ethical implications. that the cacophony of dots and dashes would someday give way to wireless Consequently, media distribution models are moving from mass to niche handheld devices that would be available to all, putting one in touch with and from synchronous to asynchronous, a transition driven at once by com­ distant events, long-lost friends, and spectacular new forms of entertain­ petitive forces, government regulations, and popular aspirations, as well ment.1 Likewise, at the dawn of cinema, radio, television, computing, and as by technological innovation. even telecommunications, each technology promised to upend social hier­ Some of the earliest inklings of change began during the 1950s, when archies and bring together a worldwide community of humankind, but the syndication of old movies and off-network reruns gave audiences a each was eventually tethered to dominant institutions, becoming a source chance to break from the scarcity principles of first-run media.4 I Love of vast profits and an instrument of political advantage.2 It's striking that Lucy reruns became a pervasive and perennial fixture of television sched­ despite the seemingly relentless pace of "technological disruption" since ules worldwide. Viewers also gained access to movie studio vaults, mining the early 1900s, many of today's major players have been with us for much the glittering appeal of Hollywood's golden age and offering new gen­ of that time: AT&T, AP, Reuters, Paramount, Fox, NBC, CBS, Time Warner, erations an expanded range of entertainment options. 5 Cable television and IBM, not to mention a plethora of military institutions that developed became the next important antecedent of today's distribution revolution. and made extensive use of each new communication device. When it was first introduced to the general public during the 1970s, cable's As for members of the general public, they enjoyed only limited control most enthusiastic proponents promised five hundred channels of novel and over what, when, and where they engaged with information and enter­ alternative content, but such aspirations outran capacity, since few could tainment. Indeed, the commercial and strategic value of media content was agree as to who would finance and develop such a system. 6 Through much produced through scarcity, that is, the selective circulation of content. Gate­ of its early history, cable television offered little more than old movies and ways to access were in the hands of a few, and the distribution of content network reruns, providing simply another window for the exploitation of was strategically controlled. Even though the film and broadcast industries existing content. The range of choices nevertheless expanded, and innova­ churned out a seemingly endless stream of novel content, much of it fea­ tiv~ programming eventually emerged.7 As cable television gained traction, tured recognizable stars and genres that were delivered to particular audi­ audiences furthermore embraced remote control devices that allowed them ences in particular locations at particular times. These "windows" of expo­ to surf among an expanding universe of channels. With remotes in hand, sure were calculated to exact higher tolls from those with greater access, they dodged commercials and restlessly flipped between programs, making thereby exploiting the full profit potential of each bit of information or television executives nervous about their waning ability to manage mass entertainment.3 During the first half of the twentieth century, media in­ audiences. 8 stitutions privileged first-run and live entertainment. Although informa­ Yet even though these technologies disrupted the media economy, they tion and entertainment were widely available, one had to attend Gone With matured in the midst of policy changes that helped to shore up the power the Wind during its theatrical run or listen to The Jack Benny Show on of major companies. During the 1980s and 1990s, for example, the federal Sunday evenings or catch the news each night at six. government responded to intensive lobbying from studios and networks to Here lay the seeds of the distribution revolution that we are experienc­ lift restrictions on the size and scope of media corporations. Top media ex­ ing today, for what we are now witnessing is the latest iteration of an on­ ecutives argued that such changes were necessary as waves of deregulation going tension between the diverse desires of audiences for cheap and easy in countries around the world opened new markets, spurring technological 8 I Introduction Introduction I 9 innovations in satellite, broadband, and computer communication. Many cible of competition among huge telecom providers operating in a newly executives and investors contended that only the very biggest conglomer­ deregulated environment.11 ates would survive the brave new era of synergy and transnational distri­ These developments proved to be "revolutionary" both because they bution. By and large, they got their way, touching off a wave of mergers that gave consumers more control and because they helped propel the nascent brought producers and multichannel distributors under the roof of sprawl­ globalization of media. Japanese companies became important players in ing conglomerates.9 American film and television; U.S. media companies expanded their satellite While CEOs anguished over the big picture, they also worried about services abroad; and European entrepreneurs jumped at the chance to roll changes in audience behaviors. The home videocassette recorder (VCR), out new satellite and cable services in a direct challenge to the public service an innovation pioneered by Japanese electronics manufacturers, allowed monopolies that prevailed in countries throughout their continent. As the audiences to record, share, and time shift their viewing of favorite movies distribution business became rife with opportunity and uncertainty, global and television shows. It also allowed them to zip through shows and zap competitors scrambled for control of content libraries. Sony bought Colum­ commercials, challenging the fundamental principles of film and television bia Pictures in 1989; Matsushita purchased Universal shortly thereafter; and distribution in the United States. This seemingly technological disruption News Corp. Australia preceded them both by picking up 20th Century Fox was actually touched off by competitive conditions in the electronics in­ in 1985.12 Italian, French, German, and British media giants made similar dustry. By the 1970s, Japanese firms were the world's leading producers and maneuvers. These mergers, acquisitions, and alliances heralded an unprece­ exporters of radio and television sets, but these core markets were becom­ dented transformation of media institutions and practices. ing saturated and profit margins were shrinking. Some companies sensed Despite such tumultuous changes, the-major media companies adapted. that personalization was the way forward, sparking the development of They pushed through legislation that allowed them to grow; they loaded the audiocassette recorder, the portable cassette player (Walkman), and the up their content libraries; and they locked down top talent in film, televi­ VCR. Sony Corporation, one of the principal innovators, was motivated sion, music, and publishing. They also responded-often reluctantly-to largely by competitive conditions in Japan and by the increasingly global­ changes in audience behaviors by establishing business models that turned ized market for consumer electronics. The resulting technologies proved new technologies to their advantage. As VCR ownership proliferated, they profoundly disruptive to American media companies, but the actual driver developed a robust video rental business. With the evolution of DVDs, of change came from the activities in hardware industries abroad.10 they established a lively sell-through market, allowing fans to purchase Other forces were at work as well. The field of telecommunications was and collect favorite films and television shows.13 at the same time being deregulated, unleashing a host of hungry new com­ Introduced in the late 1990s, DVD players were rolled out in a far more petitors and spurring new frontiers of technological innovation. Audiovi­ orderly fashion than VCRs, with Hollywood studios (Sony now among sual signals were digitized, compressed, and multiplexed, thereby enhanc­ them, having bought Columbia Pictures) and electronics manufacturers ing the speed and volume of delivery. Error correction software improved negotiating a set of standards that tamed the technology before it got to the quality and reliability of signals, eliminating static and enhancing market. As digital discs, DVDs were far cheaper to manufacture and dis­ fidelity. During the mid-199os, these technologies suddenly made it pos­ tribute than videotapes. Digital encoding also improved picture quality sible for satellite transponders to carry eight times as many channels as and made it easier to incorporate copy protection technologies that were before. Optical broadband likewise expanded the carrying capacity of ter­ energetically supported by the major media companies.14 Royalties gushed restrial and transoceanic cables. As capacity grew, ferocious price wars be­ in and DVD revenues became a source of outsized profits for film and tele­ gan that would ultimately topple some of the biggest telecommunications vision studios. The stock market value of media companies soared and the competitors. This proved to be a boon to consumers, however, driving future seemed even brighter as the penetration of digital broadband to the down prices and allowing cheaper access to telephone and computer com­ home began to pick up, promising synergistic connections between various munication. Consequently, many of the disruptive technologies that would forms of information and entertainment. Such premonitions helped jus­ prove crucial to the digital distribution revolution were forged in the cru- tify the grossly inflated value of America Online (AOL) and Time Warner 10 I Introduction Introduction I 11 when they merged in 2000. Those heady expectations were fueled in large movies that they could select online and receive via postal delivery. Unlike part by passionate declarations about the revolutionary and disruptive the brick-and-mortar movie rental shops that the major studios had come to effects of digital technologies. Left unsaid was the fact that technological embrace, Netflix offered a monthly subscription service with no late innovation was now a strategic form of competition and collaboration among fees. It also offered the most diverse catalog of titles, largely by exploiting the major media companies. a legal principle that allowed it to rent DVDs without securing a licensing In the midst of these dramatic corporate transformations, audience be­ agreement from syndicators. Customers could browse through an im­ haviors were changing in the home, on the street, and, increasingly, on­ mense digital catalog, build a personal list of preferred titles, and rate the line, as media consumers (who more and more were referred to as "active quality of each film they watched. Netflix in turn used this data to make users") were gaining greater access and control. Most controversial was recommendations for future selections, creating a profile of each subscrib­ the rapidly growing phenomenon of P2P music sharing over the Internet. er's tastes and a profile as well of each title it offered. This groundbreaking In 1999, N apster captured the spirit of music fans who eagerly ripped, level of personalization and expanded access was, like other antecedents, a stored, and shared their favorite songs without paying a penny to the ma­ product of forces external to the film and television industries. Founded by jor music companies. Such technologies were made possible by the com­ Silicon Valley engineers, Netflix pioneered many of the principles and plex convergence of forces outlined earlier, but this took on a new dimen­ practices that would come to define the digital distribution revolution in sion in the hands of a younger generation that was explicitly resentful of the entertainment industry.17 enduring limitations on access and what it saw as exorbitant prices. Some The remarkable growth of Netflix and P2P services, as well as the railed against the huge corporations that stood between performers and growing penetration of broadband services in the home, sent clear signals their fans, while others simply relished the most attractive price point of that the film and television industries would only prosper through an af­ all: free. Music companies represented by the Recording Industry Associ­ firmative response to the potential of digital distribution. Yet as late as 2003, ation of America unleashed a torrent of lawsuits, lobbied for stricter regu­ Michael Eisner, then Disney's CEO, told a gathering of broadcasting ex­ lations, and sought to shut down the biggest providers, but netizens devel­ ecutives that media companies remained profoundly conflicted. "Hollywood oped ever more imaginative ways to turn technologies to their advantage.15 studios," he said, "spend enormous sums of money encouraging people to Public debates raged over the moral and legal implications of these new see their films and TV shows and then spend more money devising ways to behaviors, but some of the darkest dialogues took place privately among control and limit how people can see their films and TV shows."18 Eisner film and television executives, knowing full well that it was only a matter was among a growing number of executives who believed another disrup­ of time before their content would be shared online as well. They hoped to tive moment was fast approaching for the motion picture business. Two delay the day of reckoning by reflecting on the failures of their counter­ years later, YouTube fulfilled that expectation, launching a streamlined, parts in the music industry. Many agreed that music executives had been user-friendly video-sharing service that was quickly populated with un­ too greedy, had resiste~ change, and had too readily taken their customers authorized clips of popular film and television content. The company re­ to court. When the digital distribution revolution came to film and televi­ sisted legal challenges from copyright owners, saying that YouTube could sion, they hoped it would look different. And of course they had more time not be held responsible for the various personal uses to which its services to think about it because the relatively slow bit rates of the 1990s Internet and platform were put. The argument was similar to the one that Napster made it difficult to deliver acceptable film and television programming used to defend itself from legal challenges, but the difference was that You­ online. Tube, as of 2006, became a division of Google, a company with extensive Nevertheless, as early as the mid- to late 1990s, a few small companies resources and one of the most aggressive legal teams in America.19 began to experiment with video-on-demand and online video distribu­ Just as frustrating for media executives was the fact that they had spent tion.16 These early innovators were operating well ahead of the Internet's tens of millions of dollars trying to develop their own online content deliv­ ability to deliver a robust range of content in a reliable and attractive man­ ery services only to see them wither by comparison to interlopers from ner. The web nevertheless became the basis for the extraordinary success Silicon Valley. The emerging threat posed by YouTube was no doubt fresh of Netflix, which offered viewers a substantial and growing catalog of DVD in their minds when they were approached by iTunes executives seeking 12 I Introduction Introduction I to license content for a video download service that they planned to launch form, the company's own website now describes itself as "the world's 21 in 2006. Disney was one of the first to sign on, followed by several other leading Internet television network," a label that undoubtedly disrupts major studios and networks. Depending on the title, iTunes offered cus­ whatever complacency is left at the major studios and networks and puts tomers digital copies that they could own or rent at prices that were lower the rest of the industry on notice. How long before the "Internet" distinc­ than most video stores. It was soon followed by Amazon and Netflix, with tion is no longer necessary? As Bruce Rosenblum, chairman of the Acad­ each offering similar services to their growing legions of customers. Nev­ emy of Television Arts and Sciences, recently said, whether people watch 2 ertheless, iTunes dominated the commercial online video market during on a mobile device, a tablet, or a flat screen, "It's all television."2 the early years of the digital distribution revolution. In 2008, it delivered These historical developments provide some larger perspective for the 87 percent of online movie sales and 53 percent of online movie rentals.20 interviews that follow. Some lessons have indeed been learned, while others Innovations in online retail and rental services were then followed by have been forgotten. Disruption or innovation, depending on one's per­ an advertising-supported service launched by Hulu in 2008, a joint ven­ spective, has come with bandwidth explosion, more powerful laptops, ture of NBCUniversal, Fox, and Disney. Although most major television personal mobile technologies, and the advent of cloud computing. It is in­ networks were already streaming video content on their branded websites, deed a revolutionary moment, perhaps because there are no inevitable Hulu signed licensing agreements with a host of content providers, becom­ outcomes, but if history offers any instructive pointers, the desires and ing the first major aggregator of ad-supported programming and making aspirations of audiences will consistently be more expansive than-and it a one-stop shop for high-quality video streams of popular TV series. Hulu quite often defy-industrial imperatives to control the parameters and po­ grew dramatically and within a year became the third most popular video tentials of media technologies. To that end, it behooves us all to keep an eye destination on the Internet. But tensions arose between the partners and on how networks and creativity are managed; to monitor the effects of con­ the executives within their respective companies. Was Fox getting a fair solidation; and to remember that those who control distribution have for return on its investment? Were NBC's own websites suffering in compari­ centuries had the power to define the size and scope of markets-in this son to Hulu? Would Disney be better off developing its own services that case, the digital space for media entertainment. Finally, it's important to leveraged the company's distinctive brands and customer base? Licensing keep an eye on popular aspirations, for there is still a great deal of negotia­ deals also became more expensive and complicated; some providers angled tion taking place between those who dream big about the future of digital for the best deals possible, while others withheld content, favoring lucrative media and the institutions that seek to tame them. cable licenses and proprietary services instead. The joint-venture partners Such overarching issues animate each of the conversations in this col­ also grew restless about ad revenues, which grew quickly at first and then lection, all of which were conducted as part of the Carsey-Wolf Center's began to slow, forcing Hulu executives to reluctantly introduce a premium Media Industries Project (MIP) at the University of California, Santa Bar­ subscription tier of service in 2010 that revived revenue growth but under­ bara. As a dedicated scholarly research program into the governing logics mined the popularity of the service with many viewers. and everyday practices of media institutions, MIP is engaged in a diverse VOD via cable providers has also been growing more popular, as com­ array of activities, including these interviews that over the past few years panies try to offer more instant, nonlinear programming options in hopes have explored the wide-ranging impact of digital distribution on the en­ of holding on to customers before they become "cord cutters." The sub­ tertainment business. Although gaining access to professionals in the enter­ scriber base and libraries of SVOD platforms such as Netflix and Amazon tainment industry can be challenging, we found that the subject of digital Instant Video have also seen tremendous growth as the digital distribu­ distribution evokes such passion among film and television professionals tion landscape expands. These two companies alone have done much to that many proved willing to speak with us about it at length and on the re­ define the market for subscription film and television in just a few short cord. Each interviewee agreed to meet with our team for a period of ninety years, with Amazon's service beginning in 2011 and Netflix going from a minutes, and some interviews lasted longer or resulted in follow-up con­ DVD-by-mail rental company founded in 1997 to the largest online pro­ versations. Prior to each interview, we sent our interlocutor a list of pro­ vider of streaming film and television shows and an original content pro­ spective topics, but the actual conversation was free ranging and expan­ ducer by 2013. In fact, while many think of Netflix as a streaming plat- sive. We preferred to follow emerging lines of discussion rather than stick WWW

Introduction I :14 I Introduction

to a structured survey format. Each session was recorded and transcribed, dow into big-picture strategic thinking about the major concerns of media conglomerates with respect to changing business models, revenue streams, averaged 12,000 words, and was then edited down to 5,000 words for in­ and audience behaviors. The executives explain how challenging it is to clusion in the anthology. Ideally, the interview sessions provided opportunities for our subjects successfully manage and distribute studio content in an environment of to step outside of their daily work routines to reflect more expansively on almost limitless choice, at a time when digital devices have effectively put the shifting media landscape and to consider emerging challenges on the "a video store in everybody's pocket." The second section focuses on in­ horizon. As it becomes apparent in the chapters that follow, some hewed novative enterprises that are providing pathbreaking models for new modes closely to their organization's official positions, while others were quite of content creation, curation, and distribution. These interviews offer per­ willing to engage in speculative and critical exchanges. In some cases our spectives from individuals operating outside of the global conglomerate. invitations to take on controversial issues were declined or deflected (some­ While a few come with established Hollywood credentials, the companies times repeatedly) and those sections were deleted during the editing pro­ they run are very much the new kids on the block-mapping out a digital cess. As critical researchers, such twists and turns in the interview process future for the entertainment industries that attempts to integrate the dis­ are themselves intriguing, but we have distilled the following chapters into parate strategies and practices of Hollywood and Silicon Valley. The final what we believe is the essence of each particular conversation, providing a section offers insights from creative talent, those who have been profoundly concise rendering of the most intriguing exchanges in individual sessions. affected by the revolution at hand. They reflect on issues of creativity, com­ Taken as a whole, this book offers a range of perspectives that document pensation, and everyday working conditions, enumerating the many ways the profound and pervasive changes engendered by the digital distribution that life inside Hollywood has changed over the past ten years. Taken to­ revolution in the film and television industries. gether, these interviews demonstrate that virtually every aspect of the film This collection also draws prominent attention to an underexplored as­ and television businesses is being affected by the digital distribution revo­ pect of the entertainment industries-media distribution. Despite distri­ lution, a revolution that has likely just begun. bution's primary importance to Hollywood's creative strategies and finan­ cial success, comparatively little has been written about this particular aspect of the business, in part because the promotion, marketing, and de­ NOTES livery of feature films and television shows were remarkably stable during 1. Catherine Covert, "'We May Hear Too Much': American Sensibility and the latter part of the twentieth century.23 Certainly the rise of the multi­ the Response to Radio, 1919-1924," in Mass Media between the Wars: Perceptions plex theater and the arrival of cable TV were disruptive in their own ways, of Cultural Tension, 1918-1941, ed. Catherine Covert and John Stevens (Syracuse, but the depth and scope of change seem greater today, generating wide­ NY: Syracuse University Press, 1984), 199-220; Lynn Spigel, Make Room for TV (Chicago: University of Chicago Press, 1992); Susan J. Douglas, Inventing Ameri­ spread discussion of the profound transformations now under way. Con­ can Broadcasting 1899-1922 (Baltimore: Johns Hopkins University Press, 1987); sequently, this book provides a glimpse into a distribution revolution in Carolyn Marvin, When Old Technologies Were New (New York: Oxford Univer­ progress. It examines the film and television industries as they wrestle with sity Press, 1988); Jefferey Sconce, Haunted Media (Durham, NC: Duke University Press, 2000); Lisa Gitelman, Always Already New (Cambridge, MA: MIT Press, economic, cultural, and technological change. Each chapter details the in­ 2006); James Carey, Communication as Culture (New York: Routledge, 1992). ternal tensions and differences within companies, between media sectors, 2. Daniel .Czitrom, Media and the American Mind (Chapel Hill: University of and between corporate and creative communities. In doing so, the book N~rth Carolma Press, 1982); Brian Winston, Misunderstanding Media (Cam­ bndge, MA: Harvard University Press, 1986); Timothy Wu, The Master Switch counters common perceptions of media conglomerates as well-oiled ma­ (New York: Vintage Books, 2011); Susan Smulyan, Selling Radio (Washington, chines that are confident of their hold on markets and audiences world­ DC: Smithsonian Institution Press, 1996); Robert McChesney, Telecommunications, wide. Instead, these interviews underscore the importance of innovation Mass Media, and Democracy (New York: Oxford University Press, 1993); Thomas and experimentation in an era of tremendous risk and uncertainty, as well Streeter, Selling the Air (Chicago: University of Chicago Press, 1996); Richard John, Network Nation (Cambridge, MA: Harvard University Press, 2010); Ithiel as opportunity. de Sola Pool, Technologies of Freedom (Cambridge, MA: Harvard University Press, The book is organized into three parts. The first section features inter­ 1983). views with top executives at leading Hollywood studios, providing a win- 3. Douglas Gomery, The Hollywood Studio System (New York: BFI, 2005). I Introduction Introduction I 17

+ Derek Kompare, Rerun Nation (New York: Routledge, 2005). 22. Gary Levin, "With Emmy Nods, Netflix Is a TV Player," USA Today, July 5. Gomery, Hollywood Studio System; Thomas Schatz, Boom and Bust (Los 18, 2013, http://www.usatoday.com/story/life/tvho13/07h8/netflix-emmy-awards Angeles: University of California Press, 1999). -house-of-cardsh552867/. 6. Thomas Streeter, "The Cable Fable," Critical Studies in Mass Communica­ 23. Notable contributions to the literature on film and television distribution tion 4, no. 2 (1987): 174-200. include Justin Wyatt, High Concept: Movies and Marketing in Hollywood (Austin: 7. Megan Mullen, The Rise of Cable Programming in the United States (Aus­ University of Texas Press, 1994); Derek Kompare, "Reruns 2.0: Revising Repetition tin: University of Texas Press, 2003); Patrick Parsons, Blue Skies: A History of for Multiplatform Television Distribution," Journal of Popular Film and Television

Cable Television (Philadelphia: Temple University Press, 2008). 381 no. 2 (2010): 79-83; Alisa Perren, "Business as Unusual: Conglomerate-Sized 8. Sheila Murphy, "ALT-CTRL: The Freedom of Remotes and Controls," in Challenges for Film and Television in the Digital Arena," Journal of Popular Film How Television Invented New Media (New Brunswick, NJ: Rutgers University and Television J8, no. 2 (2010): 72-78; Philip Drake, "Distribution and Marketing Press, 2011), 103-122; Robert V. Bellamy and James Walker, Television and the in Contemporary Hollywood," in The Contemporary Hollywood Film Industry, Remote Control: Grazing on a Vast Wasteland (New York: Guilford Press, 1996); ed. Paul McDonald and Janet Wasko (Oxford: Blackwell, 2008), 63-82; Jeffrey Ulin, Robert V. Bellamy and James Walker, The Remote Control in the New Age of Tele­ The Business of Media Distribution (New York: Focal Press, 2010); Dina Iordanova vision (Santa Barbara, CA: Praeger, 1992). and Stuart Cunningham, eds., Digital Disruption (St. Andrews Film Studies, 9. Ben Bagdikian, The Media Monopoly (Boston: Beacon Press, 2004); Herbert Scotland: Iordanova, 2012). Schiller, Culture Inc. (New York: Oxford University Press, 1989); Edward Herman and Robert McChesney, The Global Media (New York: Continuum, 2001); Robert Britt Horwitz, The Irony of Regulatory Reform (New York: Oxford University Press, 1989); Jennifer Holt, Empires of Entertainment (New Brunswick, NJ: Rut­ gers University Press, 2011); Eli Noam, Media Ownership and Concentration in America (New York: Oxford University Press, 2009). 10. Paul du Gay, Doing Cultural Studies (Thousand Oaks, CA: Sage, 1997/2013); Edward J. Epstein, The Big Picture (New York: E.J. E. Publications, 2005); Frederick Wasser, Vini, Vidi, Video (Austin: University of Texas Press, 2002). 11. Christopher H. Sterling, Phyllis W. Bernt, and Martin B. H. Weiss, Shap­ ing American Telecommunications (Mahwah, NJ: Lawrence Erlbaum Associates, 2006); Susan Crawford, Captive Audience (New Haven, CT: Yale University Press, 2013). 12. Stephen Prince, A New Pot of Gold (Los Angeles: University of California Press, 2002); Jon Lewis, American Film (New York: W.W. Norton & Company, 2007); Thomas Schatz, "The New Hollywood," in Film Theory Goes to the Mov­ ies, ed. Preacher Collins and Hilary Radner (New York: Routledge, 1992), 8-36. 13. Chuck Tryon, Reinventing Cinema (New Brunswick, NJ: Rutgers University Press, 2009); Barbara Klinger, Beyond the Multiplex: Cinema, New Technologies, and the Home (Berkeley and Los Angeles: University of California Press, 2006). 14. Lawrence Lessig, Free Culture (New York: Penguin Books, 2004), and Code Version 2.0 (New York: Basic Books, 2006); Peter DeCherney, Hollywood's Copy­ right Wars (New York: Columbia University Press, 2012); Tarlton Gillespie, Wired Shut (Cambridge, MA: MIT Press, 2007). 15. Patrick Burkhart, Music and Cyberliberties (Middletown, CT: Wesleyan University Press, 2010). 16. Stuart Cunningham and Jon Silver, Screen Distribution and the New King Kongs of the Online World (New York: Palgrave Macmillan, 2013), 16. 17- Gina Keating, Netflixed (New York: Penguin, 2012). 18. Cited in Cunningham and Silver, Screen Distribution, 21. 19. Jean Burgess, Joshua Green, Henry Jenkins, and John Hartley, You Tube (Mal­ den, MA: Polity Press, 2009); Pelle Snickars and Patrick Vanderau, eds., The You Tube Reader (Stockholm: National Library of Sweden, 2010); Joshua Jackson, You Tube: Re­ defining Cultural Production (dissertation, University of Wisconsin Press, 2013). 20. Cunningham and Silver, Screen Distribution, 2+

21. "Company Profile," Netflix, accessed September 31 2013, http://ir.netflix.com. l